What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-11-07 compared with 2023-05-09 · 185 added, 200 removed, 372 unchanged (51% of the section changed)

Financial Statements.

Electromed, Inc.

Condensed Balance Sheets

March 31, 2023

September 30, 2023

June 30, 2023

4 unchanged sentences

Prepaid expenses and other current assets

Income tax receivable

Total current assets

14 unchanged sentences

Shareholders’ Equity

Common stock, $ 0.01 par value per share,

13,000,000 shares authorized;

8,556,600 and 8,475,438 shares issued and outstanding, as of March 31, 2023 and June 30, 2022,

Common stock, $ 0.01 par value per share, 13,000,000 shares authorized;

8,579,050 and 8,555,238 shares issued and outstanding, as of September 30, 2023 and June 30, 2023, respectively

Additional paid-in capital

3 unchanged sentences

See Notes to Condensed Financial Statements (Unaudited).

Electromed, Inc.

Condensed Statements of Operations

September 30,

Cost of revenues

1 unchanged sentence

Selling, general and administrative

and development

operating expenses

before income taxes

Research and development

Total operating expenses

Operating income

Interest income, net

Net income before income taxes

Income tax expense (benefit)

Income per share:

1 unchanged sentence

See Notes to Condensed Financial Statements (Unaudited).

Electromed, Inc.

Condensed Statements of Cash

Flows (Unaudited)

Months Ended March 31,

Three Months Ended September 30,

Cash Flows From Operating Activities

Adjustments to reconcile net income to net

cash provided by operating activities:

Adjustments to reconcile net income to net cash used in operating activities:

Amortization of finite-life intangible assets

3 unchanged sentences

Accounts receivable

( 1,293,000 )

( 2,582,000 )

Contract assets

Prepaid expenses and other assets

Income tax receivable, net

Income tax payable, net

Accounts payable and accrued liabilities

Accrued compensation

cash provided by operating activities

Cash Flows From Investing Activities

Expenditures for property and equipment

( 1,174,000 )

Expenditures for finite-life

intangible assets

cash used in investing activities

( 1,132,000 )

Net cash used in operating activities

( 1,694,000 )

Cash Flows From Investing Activities

Expenditures for property and equipment

Expenditures for finite-life intangible assets

Net cash used in investing activities

Cash Flows From Financing Activities

Issuance of common stock upon exercise of

Taxes paid on net share settlement of stock

option exercises

Repurchase of common

cash used in financing activities

( 1,032,000 )

Issuance of common stock upon exercise of options

Taxes paid on net share settlement of stock option exercises

Repurchase of common stock

Net cash provided by (used in) financing activities

Net decrease in cash

( 2,155,000 )

( 2,045,000 )

Cash and cash equivalents

4 unchanged sentences

Supplemental Disclosures of Noncash Investing and Financing Activities

Property and equipment acquisitions in accounts

Intangible asset acquisitions in accounts

Lease assets obtained in exchange for new

operating lease liabilities

Property and equipment acquisitions in accounts payable

Intangible asset acquisitions in accounts payable

Demonstration equipment returned to inventory

See Notes to Condensed Financial Statements (Unaudited).

Electromed, Inc.

Condensed Statements of Shareholders’

Equity (Unaudited)

Additional Paid-

Shareholders’

1 unchanged sentence

Issuance of restricted stock

Issuance of common stock upon exercise of options

Taxes paid on stock options exercised on a net basis

Share-based compensation expense

Balance at September 30, 2021

Issuance of restricted stock

Forfeiture of restricted stock

Issuance of common stock upon exercise of options

2 unchanged sentences

Repurchase of common stock

Balance at December 31, 2021

Share-based compensation expense

Repurchase of common stock

Balance at March 31, 2022

Additional Paid-

Balance at September 30, 2022

Shareholders’

7 unchanged sentences

Balance at September 30, 2023

Issuance of restricted stock

Issuance of common stock upon exercise of options

Share-based compensation expense

Repurchase of common stock

Balance at December 31, 2022

Issuance of common stock upon exercise of options

Taxes paid on stock options exercised on a net basis

Share-based compensation expense

Balance at March 31, 2023

See Notes to Condensed Financial Statements (Unaudited).

Electromed, Inc.

Notes to Condensed

6 unchanged sentences

The Company markets its products in

to the home health care and institutional markets for use by patients in personal residences, hospitals and clinics.

Company also sells internationally, primarily through distributors.

to the home health care and hospital markets for use by patients in personal residences, hospitals and clinics.

also sells internationally through distributors.

International sales were $ 91,000 and $ 81,000

for the nine months ended March 31, 2023 and 2022, respectively.

Since its inception, the Company has operated in a single industry

for the three months ended September 30, 2023 and 2022, respectively.

Since its inception, the Company has operated in a single

industry segment:

developing, manufacturing and marketing medical equipment.

Impacts of COVID-19 on the Company’s

The potential impact of the COVID-19 pandemic

and its effects on our operational and financial performance will depend in large part on future developments, which cannot be

reasonably estimated at this time.

For a more detailed discussion, see “Management’s Discussion and Analysis of Financial

Condition and Results of Operations” in Part I, Item 2 of this Quarterly Report on Form 10-Q.

Basis of presentation:

8 unchanged sentences

of operations as required by Regulation S-X.

Interim results of operations are not necessarily indicative of the results that may

be achieved for the full year.

Interim results of operations are not necessarily indicative of the results that

may be achieved for the full year.

The financial statements and related notes do not include all information and footnotes required

3 unchanged sentences

A summary of the Company’s significant accounting

policies follows:

policies and estimates follows:

Use of estimates.

16 unchanged sentences

Common stock equivalents excluded from the calculation of diluted earnings per share because their impact was anti-dilutive were

179,992 and 102,435 for the three months ended March 31, 2023 and 2022, respectively, and were 200,140 and 112,427 for the nine

months ended March 31, 2023 and 2022, respectively.

403,944 and 212,023 for the three months ended September 30, 2023 and 2022, respectively.

Recently Issued Accounting Standards

1 unchanged sentence

Accounting Standards Update (“ASU”) 2016-13, Financial Instruments -- Credit Losses:

Measurement of Credit

Losses on Financial Instruments”, which was subsequently amended by ASU 2018-19, ASU 2019-04, 2019-05, 2019-10, 2019-11,

The standard introduces new accounting guidance for credit losses on financial instruments within its scope, including

trade receivables.

Measurement of Credit Losses

on Financial Instruments, which was subsequently amended by ASU 2018-19, ASU 2019-04, 2019-05, 2019-10, 2019-11, and 2020-02.

The standard introduces new accounting guidance for credit losses on financial instruments within its scope, including trade receivables.

This new guidance adds an impairment model that is based on expected losses rather than incurred losses.

is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2022, with early adoption permitted.

The adoption of the standard is not expected to have a significant impact on the Company’s consolidated results of operations

and financial condition.

The company adopted the

standard effective July 1, 2023.

The Company’s adoption of the standard did not have a material impact on the financial statements.

Revenue is measured based on consideration specified

25 unchanged sentences

table, net revenues are disaggregated by market:

Three Months Ended March 31,

Nine Months Ended March 31,

Institutional

Home care distributor

Schedule of disaggregated revenue

Three Months Ended September 30,

Homecare distributor

International

In the following table, net home care revenue is

In the following table, net homecare revenue is

disaggregated by payer type:

Months Ended March 31,

Revenues in the Company’s home care, home

care distributor, and international markets are recognized at a point in time when control passes to the customer upon product

shipment or delivery.

Revenues in the Company’s institutional market include revenue recognized at a point in time upon shipment

or delivery as well as revenue recognized over time under operating leases.

Three Months Ended September 30,

Medicare Supplemental

Revenues are recognized at a point in time when

control passes to the customer upon product shipment or delivery.

Performance obligations and transaction price.

6 unchanged sentences

recognition in each of the Company’s markets are discussed below:

Home care market .

Homecare market .

In the Company’s

home care market, its customers are patients who use the SmartVest System.

homecare market, its customers are patients who use the SmartVest System.

The various models of the SmartVest System are comprised

of three main components – a generator, a vest and a connecting hose – that are sold together as an integrated unit.

Accordingly, in contracts within the home care market, the Company regards the SmartVest System to be a single performance obligation.

The Company makes available to its home care

Accordingly, in contracts within the homecare market, the Company regards the SmartVest System to be a single performance obligation.

The Company makes available to its homecare

patients limited post-sale services that are not material in the context of the contracts, either individually or taken together,

2 unchanged sentences

when the related revenues are recognized.

As such, transactions in the home care market consist of a single performance obligation:

As such, transactions in the homecare market consist of a single performance obligation:

the SmartVest System.

Home care patients generally will rely on third-party

Homecare patients generally will rely on third-party

payers, including commercial payers and governmental payers such as Medicare, Medicaid and the U.S.

8 unchanged sentences

Regardless of the type of transaction, provided

criteria for an enforceable contract are met, it is the Company’s long- standing business practice to regard all home care

agreements as transferring control to the patient upon shipment or delivery, in spite of possible payment cancellation under government

criteria for an enforceable contract are met, it is the Company’s long-standing business practice to regard all homecare

agreements as transferring control to the patient upon shipment or delivery, despite possible payment cancellation under government

or commercial programs where the payer is controlling the payment over specified time periods.

For home care sales that feature

For homecare sales that feature

installment payments, the ultimate amount of consideration received from Medicare, Medicaid or commercial payers can be significantly

10 unchanged sentences

The Company’s contractually stated transaction

prices in the home care market are generally set by the terms of the contracts negotiated with insurance companies or by government

prices in the homecare market are generally set by the terms of the contracts negotiated with insurance companies or by government

The transaction price for the Company’s products may be further impacted by variable consideration.

51 unchanged sentences

short period of time.

Home care distributors.

Homecare distributors.

to distributors, who sell direct to patients, are made at fixed contract prices and may include tiered pricing structures or volume-based

1 unchanged sentence

The distributor’s

purchases accumulate to give the distributor a right to a higher discount on purchases in excess of the specified level within

the contract period.

As a result, to the extent the Company expects the distributor to exceed the specified volume of purchases

in the annual period, it recognizes revenue at a blended rate based on estimated total annual volume and sales revenue.

purchases accumulate to give the distributor the right to a higher discount on purchases more than the specified level within the

contract period.

As a result, to the extent the Company expects the distributor to exceed the specified volume of purchases in

the annual period, it recognizes revenue at a blended rate based on estimated total annual volume and sales revenue.

This effectively

3 unchanged sentences

the distributor, as applicable.

Institutional market.

Hospital market.

The Company’s

institutional sales are made to hospitals and home health care centers, pulmonary rehabilitation centers and other clinics.

to these institutions are negotiated with the individual institution or with group purchasing organizations, with payments received

directly from the institution.

hospital sales are made to hospitals and home health care centers, pulmonary rehabilitation centers and other clinics.

these hospitals are negotiated with the individual hospital or with group purchasing organizations, with payments received directly

from the hospital.

No insurance reimbursement is involved.

Generators are either sold or leased to the institutions

and associated hoses and wraps (used in institutional settings rather than vests) are sold separately.

Accordingly, each product

is distinct and considered a separate performance obligation in sales to institutional customers.

The agreements with institutions

fall into two main types, distinguished by differences in the timing of transfer of control and timing of payments:

Generators are either sold or leased to the hospitals and associated

hoses and wraps (used in hospital settings rather than vests) are sold separately.

Accordingly, each product is distinct and considered

a separate performance obligation in sales to hospital customers.

The agreements with hospitals fall into two main types, distinguished

by differences in the timing of transfer of control and timing of payments:

● Outright sale – Under these transactions, the Company sells its products for a prescribed

2 unchanged sentences

payment is made within normal credit terms, usually within thirty days.

● Wrap usage agreements – Under these transactions, the Company

provides a generator device at no cost to the hospital in return for a fixed annual commitment to purchase consumable wraps.

agreements are cancellable upon at least sixty days prior written notice by either party.

If cancelled, the generator is returned

to the Company, where it can be refurbished and used again at a later date.

Revenue for the consumable wraps is recognized when

control transfers to the customer.

● Wrap usage agreements – Under these transactions, the Company provides a generator device

at no cost to the hospital in return for a fixed annual commitment to purchase consumable wraps.

These agreements are cancellable

upon at least sixty days prior written notice by either party.

If cancelled, the generator is returned to the Company, where it

can be refurbished and used again at a later date.

Revenue for the consumable wraps is recognized when control transfers to the

International market.

11 unchanged sentences

Accounts receivable.

The Company’s accounts receivable balance is comprised of amounts due from individuals, institutions and distributors.

Balances due from individuals are typically remitted to the Company by third-party reimbursement agencies such as Medicare, Medicaid

and private insurance companies.

Accounts receivable are carried at amounts estimated to be received from patients under reimbursement

The Company’s accounts receivable balance is comprised of amounts due from individuals, hospitals and distributors.

due from individuals are typically remitted to the Company by third-party reimbursement agencies such as Medicare, Medicaid and

private insurance companies.

Accounts receivables are carried at amounts estimated to be received from patients under reimbursement

arrangements with third-party payers.

16 unchanged sentences

provides information about contract assets from contracts with customers:

March 31, 2023

Schedule of contract asset

Three Months Ended September 30, 2023

Fiscal Year Ended

June 30, 2023

Increase (decrease)

Contract assets, beginning

2 unchanged sentences

Contract assets recognized

Increase (decrease) as a result of changes

in the estimate of amounts to be realized from payers, excluding amounts transferred to receivables during the period

Increase (decrease) because of changes in the estimate of amounts to be realized from payers, excluding amounts transferred to receivables during the period

Contract assets, ending

8 unchanged sentences

The components of inventory were as follows:

September 30, 2023

June 30, 2023

Parts inventory

6 unchanged sentences

its products to the prescribed patient for sales within the U.S.

and a three-year warranty for all institutional sales and sales

to individuals outside the U.S.

The Company estimates the costs that may be incurred under its warranty and records a liability

in the amount of such costs at the time the product is shipped.

Factors that affect the Company’s warranty reserve include

the number of units shipped, historical and anticipated rates of warranty claims, the product’s useful life and cost per

and a three-year warranty for all hospital sales and sales to

individuals outside the U.S.

The Company estimates the costs that may be incurred under its warranty and records a liability in

the amount of such costs at the time the product is shipped.

Factors that affect the Company’s warranty reserve include the

number of units shipped, historical and anticipated rates of warranty claims, the product’s useful life and cost per claim.

The Company periodically assesses the adequacy of its recorded warranty reserve and adjusts the amounts as necessary.

1 unchanged sentence

reserve were as follows:

March 31, 2023

Three Months Ended

September 30, 2023

Fiscal Year Ended

June 30, 2023

1 unchanged sentence

Accrual for products sold

Expenditures and costs

incurred for warranty claims

Expenditures and costs incurred for warranty claims

Warranty reserve, ending

Income tax expense was estimated at $ 64,000 ,

and $ 418,000 , and the effective tax rate was 12.0 % and 16.4 % for the three and nine months ended March 31, 2023, respectively.

Estimated income tax expense for the three and nine months ended March 31, 2023 includes a discrete current tax benefit of $ 176,000

and $ 219,000 , respectively, related to the exercise of stock options.

Income tax expense was estimated at $ 224,000

and $ 576,000 , and the effective tax rate was 25.8 % and 23.1 % for the three and nine months ended March 31, 2022, respectively.

Estimated income tax expense for the three and nine months ended March 31, 2022 includes a discrete current tax benefit of $ 22,000

and $ 43,000 , respectively, related to the exercise of stock options and other items.

and the effective tax rate was 29.3 % for the three months ended September 30, 2023.

Income tax benefit was estimated at $ 33,000 ,

and the effective tax rate was ( 68.8 %) for the three months ended September 30, 2022.

Estimated income tax expense for the three

months ended September 30, 2022 included a discrete current tax benefit of $ 44,000 related to the exercise of stock options.

The Company is subject to U.S.

11 unchanged sentences

The Company has a credit facility that provides

for a $ 2,500,000 revolving line of credit.

There was no outstanding principal balance on the line of credit as of March 31, 2023

or June 30, 2022.

Interest on borrowings under the line of credit, if any, accrues at the prime rate ( 8.00 % at March 31, 2023)

less 1.00 % and is payable monthly.

The amount eligible for borrowing on the line of credit is limited to the lesser of $ 2,500,000

or 57.00 % of eligible accounts receivable and the line of credit expires on December 18, 2023 , if not renewed before such date.

At March 31, 2023, the maximum $ 2,500,000 was eligible for borrowing.

Payment obligations under the line of credit, if any, are

secured by a security interest in substantially all of the tangible and intangible assets of the Company.

for a $ 2,500,000 revolving line of credit through December 18, 2023 if not renewed before such date.

There was no outstanding principal

balance on the line of credit as of September 30, 2023 or June 30, 2023.

Interest on borrowings under the line of credit, if any,

accrues at the prime rate ( 8.50 % at September 30, 2023) less 1.00 % and is payable monthly.

The amount eligible for borrowing on

the line of credit is limited to the lesser of $ 2,500,000 or 57.00 % of eligible accounts receivable.

On September 30, 2023, the

maximum $ 2,500,000 was eligible for borrowing.

Payment obligations under the line of credit, if any, are secured by a security

interest in substantially all of the tangible and intangible assets of the Company.

The documents governing

1 unchanged sentence

less than $ 10,125,000 and restrictions on the Company’s ability to incur certain additional indebtedness or pay dividends.

The Company’s Articles of Incorporation, as amended, have established 15,000,000 authorized shares

of capital stock consisting of 13,000,000 shares of common stock, par value $ 0.01 per share, and 2,000,000 shares

of undesignated stock.

May 26, 2021, the Company’s Board of Directors (the “Board”) approved a stock repurchase authorization.

the authorization, the Company was originally able to repurchase up to $ 3.0 million of shares of common stock through

May 26, 2022.

On May 26, 2022, the Board removed the date limitation.

As of March 31, 2023, a total of 239,995 shares

have been repurchased and retired under this authorization for a total cost of $ 2,725,000 , or $11.36 per share.

shares have been retired and constitute authorized but unissued shares.

Authorized shares:

Company’s Articles of Incorporation, as amended, have established 15,000,000 authorized shares of capital stock

consisting of 13,000,000 shares of common stock, par value $ 0.01 per share, and 2,000,000 shares of undesignated

On May 26, 2021, the Company’s

Board of Directors (the “Board”) approved a stock repurchase authorization.

Under the authorization, the Company was

originally able to repurchase up to $ 3.0 million of shares of common stock through May 26, 2022.

On May 26, 2022, the

Board removed the date limitation.

As of September 30, 2023, a total of 239,995 shares have been repurchased and retired

under this authorization for a total cost of $ 2,725,000 , or $ 11.36 per share.

Repurchased shares have been retired and constitute

authorized but unissued shares.

There were no share repurchases for the three months ended September 30, 2023.

Share-Based Compensation

1 unchanged sentence

plans are described in Note 8 to the financial statements included in the Company’s Annual Report on Form 10-K for fiscal

Share-based compensation expense was $ 506,000 and $ 703,000 for the nine months ended March 31, 2023 and 2022, respectively.

Share-based compensation expense was $ 371,000 and $ 95,000 for the three months ended September 30, 2023 and 2022, respectively.

This expense is included in selling, general and administrative expense in the Condensed Statements of Operations.

1 unchanged sentence

Stock option transactions during

the nine months ended March 31, 2023 are summarized as follows:

Weighted-Average

Exercise Price per

the three months ended September 30, 2023 are summarized as follows:

Schedule of stock option transactions

Number of Shares

Weighted-Average Exercise Price per

Outstanding at June 30, 2023

Cancelled or Forfeited

Outstanding at March 31, 2023

Outstanding at September 30, 2023

The following assumptions were

used to estimate the fair value of stock options granted:

Nine Months Ended

March 31, 2023

Fiscal Year Ended

June 30, 2022

Schedule of assumptions were

used to estimate the fair value of stock options granted

Three Months Ended September 30, 2023

Fiscal Year Ended June 30, 2023

Risk-free interest rate

5 unchanged sentences

by which the fair value of the underlying stock exceeds its exercise price.

At March 31 2023, the weighted average remaining contractual

term for all outstanding stock options was 5.9 years and the aggregate intrinsic value of the options was $ 1,802,672 .

at March 31, 2023 were 468,128 stock options issued to employees, of which 339,342 were vested and exercisable and had an aggregate

intrinsic value of $ 1,762,445 .

As of March 31, 2023, $ 328,218 of total unrecognized compensation expense related to stock options

is expected to be recognized over a weighted-average period of approximately 2.0 years.

At September 30, 2023, the weighted average remaining

contractual term for all outstanding stock options was 6.9 years and the aggregate intrinsic value of the options was $ 1,740,000 .

Outstanding on September 30, 2023 were 697,552 stock options issued to employees, of which 375,673 were vested and exercisable

and had an aggregate intrinsic value of $ 1,717,000 .

As of September 30, 2023, $ 1,444,000 of total unrecognized compensation expense

related to stock options is expected to be recognized over a weighted-average period of approximately 3.25 years.

Restricted Stock

During the nine months ended March 31, 2023,

the Company issued restricted stock awards to employees totaling 32,400 shares of common stock, with a weighted average vesting

term of 2.7 years and a weighted average fair value of $ 9.92 per share, and to directors totaling 21,000 shares of common stock,

with a vesting term of six months and a weighted average fair value of $ 9.86 per share.

There were 57,818 shares of unvested restricted

stock with a weighted average fair value of $ 10.32 per share outstanding as of March 31, 2023.

As of March 31, 2023, $ 244,063 of

total unrecognized compensation expense related to restricted stock awards is expected to be recognized over a weighted-average

period of approximately 1.3 years.

During the three months ended September 30, 2023,

the Company issued restricted stock awards to employees totaling 20,878 shares of common stock, with a vesting term of three years

and a weighted average fair value of $ 10.72 per share.

There were 39,111 shares of unvested restricted stock with a weighted average

grant date fair value of $ 10.49 per share outstanding as of September 30, 2023.

As of September 30, 2023, $ 257,000 of total unrecognized

compensation expense related to restricted stock awards is expected to be recognized over a weighted-average period of approximately

Performance-Based Restricted Stock Units

We have granted 175,000 performance-based restricted

stock units (“PSUs”) to our CEO in connection with his appointment as CEO on July 1, 2023.

The PSUs are to be earned

based on the extent to which performance goals tied to Total Shareholder Return (“TSR”) are achieved.

The performance-based

restricted stock units will be eligible to vest and settle into shares of common stock on a 1-for-1 basis with respect to one-half

of the shares upon achieving a total shareholder return of 50% and the remaining shares upon a total shareholder return of 100%,

in each case within four years of the date of grant.

The grant date fair value of the awards was determined using a Monte Carlo

valuation model with an expected term of four years.

Stock based compensation expense recognized for

PSUs was $ 73,000 and $ 0 for the three months ended September 30, 2023 and 2022, respectively.

The weighted average grant date fair

value per unit was $ 6.58 and as of September 30, 2023 there are 175,000 PSUs outstanding.

On September 30, 2023, there was approximately

$ 1,079,000 of total unrecognized compensation expense related to outstanding PSUs that is expected to be recognized over a period

of 3.75 years.

Commitments and Contingencies

11 unchanged sentences

claims are without merit.

Accordingly, on November 11, 2021, the Company moved to dismiss

the complaint in its entirety.

Prior to the hearing on the motion to dismiss, the parties agreed in principle to settle the case.

parties have executed a settlement agreement and submitted a motion to settle the class action in the near future.

During January

2023, the settlement was preliminarily approved.

The hearing for final approval is scheduled for June 5, 2023.

If the court does

not grant the approval for settlement, the Company will continue to vigorously defend the lawsuit.

At this time, the Company is

unable to determine the ultimate outcome or potential exposure to loss, if any.

Accordingly, on November 11, 2021, the Company moved to dismiss the complaint in its entirety.

to the hearing on the motion to dismiss, the parties agreed in principle to settle the case.

The parties have executed a settlement

agreement and submitted a motion to settle the class action.

During January 2023, the settlement was preliminarily approved.

hearing for final approval took place on June 5, 2023.

Following the final approval hearing, the court issued a judgment on July

10, 2023 granting a motion for final approval of the settlement.

Payment was made to the settlement fund during the first quarter

of fiscal 2024 for the settlement amount of $ 825,000 which was covered by insurance, resulting in a reduction in other current

assets and other accrued liabilities.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements